With the approach of the Beijing Olympic Games in just a few days, experts in China and abroad have begun to raise a common concern over the so-called Olympic economy. The Games have long been deemed a double-edged sword – one which can either help boost the economy of the host country or drag it into an economic abyss.
In the backdrop of a global economic slowdown and prices hikes, China's economy, on a spectacular rise for over two decades, has been more or less affected and moved in a comparatively calm pace in the first half of the year. Nevertheless, a 10.4 percent growth rate achieved in previous months has already laid a solid foundation for China's economic performance this year. Experts are convinced that the Olympics will further beef up China's economy and create a new momentum for its economic growth.
Since Beijing won the Olympic bid in 2001, preparation for the Games has all along pushed up the economic growth rate in Beijing as well as in the entire country. According to Lin Xianpeng, director of the economic and industrial teaching and research office at the Beijing Institute of Physical Culture and Education, the total economic influence of the 2008 Beijing Olympic Games is estimated to be nearly RMB 600 billion yuan. That is about RMB 250 billion yuan in addition to 347 billion yuan created by the indirect and direct Olympic economic influence.
Based on Investment Multiplication Effects, the profits made from the Games will likely exceed conservative estimates. As is well known, the Olympics could not only boost to the host country's national economy, but could also produce more new jobs and industries. Meanwhile, the infrastructural system in some Olympics-related cities will be greatly innovated or upgraded. Accordingly, the price of assets in fixed assets investment, stocks and futures markets will be actively influenced. All this put together will build up the creamy layer on a country's economy cake.
Take Beijing for instance: during the Olympic input period of 2005-2008, the annual municipal GDP growth rate will have averaged 11.8 percent, up 0.8 percentage points over the period of the Tenth Five-year Plan, of which the year 2007 spiked up 1.14 percentage points. From 2004 till 2008, Beijing's GDP growth driven by the Olympic Games has topped RMB 105.5 billion yuan.
Despite the fact that the Olympics can bolster a host country's economic growth, the effects of the Olympics on the economic boost should not be overestimated. Judging from the experience drawn by other host countries, two obvious conclusions can be drawn: first, the economic growth rate could suddenly accelerate just before the Games, which only happens in countries with a relatively minimal total economic volume, like the Republic of Korea (ROK). In the years before the 1988 Olympics was held in Seoul, the ROK's economic growth had remained unprecedentedly robust at over 10 percent year-on-year. Second, the impact of the Olympics on powerful economies is comparatively small. For example, the 1996 Atlanta Olympics only brought the U.S. a slight rise of 2.5 percent in the host country's economic growth in the year prior to the Games.
In the meantime, we also need to recognize that the upcoming Olympics could bring China both new opportunities and challenges. Additionally, we should try to steer clear of two undesirable phenomena which are said to be side effects induced by the Games: First, the White Elephant Phenomenon, which refers to gigantic yet useless things, and here specifically points to the grand venues designed for the Games but possibly left useless afterwards. Second, the Montreal Phenomenon, which represents a serious drain in public resources caused by the massive construction of Olympic venues; and the government, as a result, will have to increase the Olympic tax to reverse any post-Games losses.
As the last 30 years have shown, we must admit that a higher degree of market-orientation for the Olympic operation will more effectively avert post-Olympic risks.
By People's Daily Online